Loan Against Fixed Deposit 2026: Interest Rates, Overdraft Limits, and When It Beats a Personal Loan
By Nitish Bharadwaj · Published Jul 19, 2026 · 5 min
A loan against fixed deposit lets you borrow up to 90-95% of your FD's value at just 0.5-2% above the FD's own interest rate — SBI charges 1% over, Axis Bank 2% over — while your deposit continues earning interest untouched. Most banks structure it as an overdraft, so you pay interest only on what you actually draw, not the full sanctioned limit. This guide covers eligibility, minimum FD amounts by bank, what happens if you default, and why it usually beats an unsecured personal loan for anyone who already holds a fixed deposit.
If you already hold a fixed deposit and need cash, breaking the FD early usually means losing accrued interest and paying a penalty. A loan against fixed deposit avoids both — your FD stays intact and keeps earning its full rate, while you borrow against it at a fraction of what an unsecured personal loan would cost.
How the Overdraft Structure Works
Most banks don't disburse this as a lump-sum loan — they set it up as an overdraft (OD) facility linked to your FD account. You get a sanctioned limit, typically 90-95% of your FD's value, but interest accrues only on the amount you actually withdraw and only for the days you hold it, not on the full sanctioned limit. Repay whenever you like, in any amount, with no fixed EMI schedule in most cases. Your original FD keeps earning its contracted interest rate the entire time, untouched, since the bank places a lien on it rather than liquidating it.
Interest Rates and Loan Amounts
| Bank | Rate Over FD Rate | Max LTV | Minimum FD for Overdraft |
|---|---|---|---|
| SBI | ~1% above FD rate | Up to 90-95% | ₹5,000 |
| Axis Bank | ~2% above FD rate | Up to 90% | ₹25,000, minimum 6 months + 1 day tenure |
| HDFC Bank, ICICI Bank | 1-2% above FD rate (varies by tenure) | Up to 90% | Varies by branch; typically ₹25,000+ |
Since the loan rate is pegged to your own FD's interest rate rather than your credit profile, this is one of the few borrowing products in India where your CIBIL score barely matters. A senior citizen FD earning 7.5% might see a loan rate of around 8.5-9.5% — sharply cheaper than the 11-24%+ that an unsecured personal loan would charge, and far less dependent on how your credit score affects loan pricing.
Eligibility and How to Apply
Eligible applicants include individuals (resident Indian or NRI), HUFs, proprietorships, and partnership firms — essentially anyone who holds an eligible FD at the bank in their own name or jointly. The FD must typically have a minimum residual tenure of six months and one day at the time of application. Most banks process this within a day since no fresh income or employment documentation is needed — the FD itself is the only underwriting input that matters. Application can usually be completed through net banking or the bank's mobile app by selecting the specific FD to pledge.
How It Compares to Other Loan-Against-Asset Options
If you hold investments beyond fixed deposits, a loan against mutual funds and a loan against shares work on a similar lien-based principle, though both carry market-linked risk — a falling NAV or share price can trigger a margin call, forcing you to add funds or accept partial liquidation. An FD-backed loan has no such risk, since a fixed deposit's value doesn't fluctuate; the trade-off is that FDs typically earn lower returns than equity-oriented mutual funds, so the opportunity cost of locking one up is usually smaller in absolute terms, but so is the loan amount it can support relative to a large equity portfolio. If your only eligible asset is an old endowment or money-back life insurance policy rather than an FD, our loan against life insurance policy guide covers the same overdraft-style logic applied against a policy's surrender value instead. A PPF account offers a related but structurally different facility — a loan against PPF is available only in a fixed 3rd-to-6th-year window and caps out at 25% of a two-year-old balance, a much lower ceiling than an FD-backed overdraft allows.
When This Beats a Personal Loan
- You need funds only briefly (a few weeks to a few months) — an overdraft's pay-only-for-what-you-use structure makes short-term borrowing far cheaper than a personal loan's full-tenure interest calculation
- Your credit score is weak or you have no credit history at all — since approval depends on the FD, not your CIBIL file, this route works even for a New-to-Credit borrower
- You want to avoid breaking a long-tenure FD and losing its preferential locked-in rate, especially one opened when interest rates were higher than they are today
- You don't want a hard inquiry on your credit report — many banks don't run one for FD-backed loans since the FD itself is the security, though policies vary by lender